Customer Acquisition Cost

Customer acquisition cost refers simply to the average cost of convincing a customer to buy your product or service. It differs from cost-per lead (CPL) metric in that it does not only measure interest in buying a product but looks at what it actually costs to drive a conversion.

Why does it matter?

In eCommerce and other industries, cost per acquisition is often the most important overall metric for marketers to pay attention to. Customer acquisition cost is often the most directly correlated to profitability as it often accounts for actual revenue, rather than clickthroughs, form-fills or other actions

Additionally, while cost-per-lead often only measures the effects of advertising, customer acquisition cost provides a full snapshot of ROI at all stages of the purchase funnel.

Measuring Customer Acquisition Cost

Divide all costs spent on bringing in more customers by the number of new new customers acquired while the money was spent. For example, if you spent $50,000 to bring in ten new customers, your cost per customer acquisition is $5,000.

It is important to note that customer acquisition cost can fluctuate greatly, particularly at the beginning of an advertising campaign. If you have spent large sums of money on acquisition but have a long purchase cycle, customer acquisition cost will not become an actionable metric until the average length of the purchase cycle has completed.